How to check mismanagement of extractive revenues – Okonjo Iweala

Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has advocated the adoption of far-reaching measures to curb opaque management of extractive revenues from African countries, especially Nigeria.

Okonjo-Iweala gave the recommendation recently at an event: “Open for Growth”, organised by the United Kingdom government before the concluded G8 summit in Northern Ireland.

She said the new push by the G8 to enthrone transparent tax disclosures especially amongst companies engaged in extractive activities in Africa would further boost efforts by countries to keep tab on their extractive revenues.

She noted that while such commitment would be good, it could also be backed further by extra monitoring measures to ensure effective compliance.

While seconding President of Tanzania, Jakaya Kikwete’s call for scaling up of support to governments in negotiating mining contracts, Okonjo-Iweala suggested that the launch of a special measure; “tax inspectors without borders,” could also be considered in the process of boosting transparency and accountability in the management of extractive revenues.

She posited that such proactive measure would be welcomed by Nigeria to help with her extractive industry accounting.

President Goodluck Jonathan recently directed all agencies affected by the oil and gas revenue disclosure audit reports of the Nigeria Extractive Industries Transparency Initiative (NEITI) to recover an outstanding $9.6 billion shortfall uncovered by its audit reports on Nigeria’s oil and gas sector.

NEITI has over time in its annual audit, reported underpayments in revenues accrued to Nigeria by companies involved in the country’s oil and gas industry; the transparency agency also have challenges convincing culpable companies to remit such underpayments to government revenue collection agencies.

The Prime Minister of Britain, David Cameron, who opened discussion at the event stated that countries with extractive resources required fairer taxes, greater transparency and more trade to grow their economies, adding that aid alone cannot end poverty.

“Poverty eradication requires that developing countries get the revenues and the benefits of growth that are rightfully theirs. And three vital things are needed to make that happen: fairer taxes, greater transparency and more trade,” Cameron said.

He further explained: “When taxes are not collected, the poor suffer. In fact, illicit flows out of African countries exceed what they gain in aid. When companies extracting natural resources like minerals and oil are not transparent and don’t publish the payments they make or when governments allow these payments to leach away into corruption people in developing countries miss out on the vital revenues they are due.”

Shedding more light on the need for transparent management of extractive revenues, the prime minister stated: “We need real transparency in the payments companies make and the revenues that governments receive. Just think for a moment about the discovery of North Sea Oil off the coast of Britain. It has given this country revenue of over £150 billion, boosting our balance of payments by almost £50 billion a year and supporting nearly half a million jobs.

Now imagine if we had no transparency over the way that oil was extracted. Imagine what it would have been like if we had most of our oil revenues taken from us by corrupt politicians, officials and companies. Too often that has been the story for developing countries. But with transparency we can change that.”

“In the last few years, we have seen huge advances. Oil, gas and mining companies will now have to publish what they pay in every country and for every project they work on. That’s already law in America. It’s becoming law in Europe. And will be in Canada too. Governments in return are committing to publish what they receive. Many developing countries made this commitment a while ago. Now Britain, France and America are joining them too. And we hope that others will follow suit.”